The Portuguese government has expressed serious concerns regarding a proposal from the European Commission to revise the directive on tobacco taxation and the general regime of excise taxes, according to a statement issued today by the Ministry of Finance. The government stated, “Portugal has reservations about applying equal taxation to cigarettes and other smoking methods that are less harmful to health.”
The government argues that increasing taxation in this manner could lead to more illicit trade, as observed in other countries that have pursued similar taxation strategies. The harmonization of tobacco taxes at the European level prompted the European Commission to propose a revision of these directives on July 16, aiming to establish common rules for taxing new forms of tobacco such as heated tobacco and electronic cigarettes, which are gaining market traction.
The Portuguese government finds the proposal “concerning,” the statement reads. “The proposal aims to tax cigarettes and less harmful smoking forms equally. As taxes serve as a deterrent, we believe that less harmful smoking forms should have a lighter tax burden to encourage smokers to switch to these products,” states the Ministry of Finance.
As the Commission’s initiative seeks to increase tobacco taxes and this would directly impact pricing, the government foresees a rise in illicit trade. This outcome is deemed “an economic policy mistake” with “negative effects on tax revenue.”
The ministry also fears that Portugal could lose 1.5 billion euros due to the transfer of part of the tax revenue to the European Union’s budget. Along with the directive revisions, the European Commission’s proposal for the new Multiannual Financial Framework 2028-2034 (QFP 28-34) includes plans to source part of the community budget funds through transferring a share of the Special Tobacco Tax collected by the 27 member states.
“For Portugal, the current proposal may result in a national tax revenue loss of up to 1.5 billion euros, which is naturally unacceptable under present conditions,” the ministry stated. The executive believes that the transfer value is unacceptable.
“For Portugal, the current proposal may result in a national tax revenue loss of up to 1.5 billion euros, which is naturally unacceptable under current conditions,” responded the Ministry of Finance, ensuring that “the government will evaluate, within the framework of the Multiannual Financial Framework negotiations, the allocation of a portion of the increased tax revenue to the Union’s budget.”
The proposal to revise the directive on the structure and rates of tobacco taxation is justified by Brussels, highlighting existing deregulation at the European level and emphasizing the role of increasing taxes in consumption reduction.
The European Commission reminds that the EU still has a “high number of smokers,” with 21% of young people smoking, and that “the launch of the European Plan Against Cancer emphasizes the critical role taxation plays in reducing tobacco consumption and deterring young people from smoking.”
“The lack of EU-level regulation and explicit provisions for new products (such as electronic cigarettes and heated tobacco) that serve as substitutes for traditional tobacco has led to various tax regimes in member states, causing administrative difficulties,” the European Commission adds.
